Standing Committee C

[Mr. George Stevenson in the Chair]

Co-operatives and CommunityBenefit Societies Bill

Clause 1 - Community benefit societies

Question proposed, That the clause stand part of the Bill.

George Stevenson: With this it will be convenient to discuss new clause 1—Community Benefit Societies: power to restrict use of assets—
'(1) The Treasury may by regulations make provision for enabling any community benefit society, or any community benefit society of a prescribed kind, to ensure that— 
 (a) assets of the society of a prescribed kind, 
 (b) assets of the society specified by it in accordance with the regulations, or 
 (c) all of the society's assets, 
 cannot be used or dealt with except in a case mentioned in subsection (2). 
 (2) The cases are— 
 (a) where the use or dealing is, directly or indirectly, for a purpose that is for the benefit of the community and is of a prescribed kind or, if no kinds of purpose are prescribed under this paragraph, for any purpose that is for the benefit of the community; or 
 (b) where the circumstances are such as may be prescribed. 
 (3) Where under the regulations a society has ensured as mentioned in subsection (1) as respects any of its assets, the assets concerned are ''dedicated assets'' for the purposes of this section. 
 (4) Regulations under this section may, in particular— 
 (a) provide for the procedure by which a society may ensure as mentioned in subsection (1); 
 (b) provide for such of a society's rules as are of a prescribed kind to be unalterable, or for them to be alterable only in prescribed circumstances or in circumstances specified in rules of a prescribed kind; 
 (c) provide that, in any circumstances prescribed under subsection (2)(b), dedicated assets must be dealt with in a prescribed way; 
 (d) make provision for ensuring that any society, company or other person to whom any dedicated assets are transferred in prescribed circumstances cannot use or deal with those assets except in a case mentioned in subsection (2); 
 (e) provide for members of a society who lose property rights as a result of the society's ensuring as mentioned in subsection (1) to be compensated for that loss (whether by payment of a prescribed amount or of an amount determined in a prescribed way or otherwise), subject to such exceptions as may be prescribed; 
 (f) provide for the enforcement of provisions designed to ensure as mentioned in subsection (1); 
 (g) make provision for the carrying out of investigations by persons appointed by a prescribed person; 
 (h) confer power on a prescribed person to require persons of a prescribed description to provide him with information in order to enable him to perform his functions under the regulations; 
 (i) provide for restrictions on the use and disclosure of information obtained by any person in the performance of any function under the regulations. 
 (5) Regulations under this section may— 
 (a) impose criminal liability; 
 (b) confer functions on a prescribed person; 
 (c) confer jurisdiction on any court; 
 (d) authorise a prescribed person to make rules binding on persons of a prescribed description and make provision as to the making, publication and enforcement of such rules; 
 (e) provide for a prescribed person to charge fees sufficient to meet the costs of carrying out any of his functions under the regulations; 
 (f) modify, exclude or apply (with or without modifications) any enactment or rule of law; 
 (g) contain such incidental, consequential and supplemental provision as the Treasury consider appropriate; 
 (h) make different provision for different cases. 
 (6) The power to make regulations under this section is exercisable by statutory instrument. 
 (7) No regulations may be made under this section unless a draft of the regulations has been laid before Parliament and approved by a resolution of each House. 
 (8) In this section— 
 ''community benefit society'' means a society registered (or deemed to be registered) under the 1965 Act which fulfils the condition in section 1(2)(b) of that Act; 
 ''enactment'' includes an enactment comprised in— 
 (a) an Act of the Scottish Parliament; 
 (b) subordinate legislation, whether made under an Act or an Act of the Scottish Parliament; and 
 ''prescribed'' means prescribed by regulations under this section.'.

Mark Todd: I thank you, Mr. Stevenson, for being prepared to act as Chairman. Bearing in mind the alternative attraction this afternoon, I am sure that all hon. Members will wish to be brief, and that we will not press you to exercise your responsibilities with any great vigour. I also express my appreciation to those hon. Members who have been able to attend this afternoon.
 I propose new clause 1 as a substitute for clause 1. I remind the Committee that the purpose of clause 1 was to permit a voluntary asset lock on the four community benefit societies. It is voluntary in the sense, first, that it would allow new societies to pass a rule locking their assets; and, secondly, that it would allow existing societies to present that option to their members, should they so wish. The provision was meant to ensure that assets could not be used except for the benefit of the community for which the society was originally established, but it would allow the transfer of those assets to another society with a similar purpose and a similar rule. 
 It was recognised that clause 1 required redrafting in order to enable the Treasury to act through secondary legislation. The proposed new clause sets out the issues on which the Treasury would consult, and the constraints on the freedom of the Treasury to decide to legislate on the matter. It is not possible for the Bill to cover every aspect of the asset locks, as consultation will clearly be required first. However, although the Financial Services Authority will not register a community benefit society unless it has an asset lock in its constitution, it was recognised that 
 that was not a watertight position and that a community benefit society could choose to convert into a company and then use the assets for whatever benefit it wished, including for the benefit of members of the society. 
 The strategy unit report that was mentioned on Second Reading referred to the importance of providing security to those wishing to establish community benefit societies, for whatever purpose. It is critical that the asset lock should not impede the efficient running of the society or prevent democratic decisions being made allowing alteration to the means of fulfilling the society's goal—for example, through a merger with another society. 
 Subsection (1) of the new clause will enable regulations to be made to define which societies can adopt a lock-in, and allow a choice in the scope of assets that can be locked. Community benefit societies vary widely, as we heard on Second Reading, and it may be that, after consultation, asset locks may be judged inappropriate in some circumstances, either in terms of the type of society or the form of assets that it holds. 
 Subsection (2) allows for flexibility in regulations to define the purposes for which assets may be locked. In my view, it is unlikely that the differentiation will be applied. It is for societies to define their purposes and, if they agree that an asset is locked, to lock it into that purpose. In any case, the purpose would have been scrutinised by the regulator on the establishment of the society. However, it is possible to conceive of circumstances in which a purpose has become so redundant that external guidance is required in relation to an asset transfer. Subsection (2) would facilitate that process. 
 Subsection (3) is self-explanatory. Subsection (4) sets out the framework for a potential lock-in. Just one element requires further explanation. As existing societies will be allowed to adopt a lock-in resolution, it will be necessary to consider, during the consultation process and in the formulation of any subsequent regulation, whether any member who disagreed with the resolution and assumed his or her entitlement to a proportion of any future break-up value of the society, following its conversion to a company, might require compensation for that loss of a notional asset. He or she would be an extremely far-sighted member, but I suppose that the situation is hypothetically possible. The new clause deals with the need to consult on such matters during the process, which will be led by the Treasury. 
 Another point worth considering is that the reference to prescribed persons correctly implies that the Treasury may choose to place the regulatory function for the process in new hands, not with the FSA or another existing body. That is a reasonable aspect for further discussion. If, as the strategy unit report suggests, lack of an asset lock is a serious barrier to the use of community benefit society models, one might expect their wider adoption. If that were the case, a new regulatory function might be appropriate. Of course, it might also be appropriate for there to be no regulatory body to carry out that function, but I 
 would imagine that people would be able to submit that opinion in any consultation process. 
 I have explained the key features of new clause 1.

Stephen O'Brien: I, too, welcome you to the Chair, Mr. Stevenson. This is my first opportunity to serve under your chairmanship, which I expect will be both a great pleasure and a relatively brief one.
 Clause 1 gives me the opportunity to make a few introductory remarks, which I hope will be in order, and to echo the comments of the hon. Member for South Derbyshire (Mr. Todd). I congratulate him, as I did on Second Reading, on securing his advantageous position in the private Member's Bill ballot—there can be no more advantageous position than to come top. I also congratulate him on selecting this topic for his intended legislation. 
 During a constructive and consensual debate in the House on 31 January, we identified the fact that the principles and intent behind the hon. Gentleman's aspiration to see legislation introduced not only survive but attract broad interest and support from the Government and Her Majesty's official Opposition. We are happy to lend our support to the Bill, subject to the proper scrutiny that this House affords to all legislation. 
 I am also conscious that there are other important events in the House today, so we want to dispatch the Bill as efficiently as we can. It is appropriate for me to draw attention to my entry in the Register of Members' Interests, as I did on Second Reading. I am a parliamentary adviser to the Institute of Chartered Secretaries and Administrators, of which I am a fellow, having been a company secretary of a FTSE 100 company before I entered the House. 
 One overall aspect applies to new clause 1 and the other proposed new clauses. Although I know that it is not a requirement for a private Member's Bill, it would have been helpful, and may yet still be possible if the Government are prepared to consider it, if a regulatory impact assessment had been issued. The nature of the new clauses suggests that one is necessary, and I would certainly welcome such an assessment, which is now the norm and expectation for Government Bills. I understand that the Government examined the Bill as first presented and that they have had a hand in drafting the new clauses, so it is incumbent on them to be consistent with their broad approach and issue a regulatory impact assessment. 
 That is particularly important, given the lack of explanatory notes, which is understandable, on the difference between the initial Bill and the current proposals. Some of the remarks made by Members on Second Reading have been sensibly considered in the drafting of the new clauses, but without explanatory notes, a regulatory impact assessment would be helpful. There is a degree to which that imposes a regulation, or at least an effort and burden, on those who so ably support the Minister, but I hope that an assessment will be forthcoming. 
 We do not take issue with the principle of a voluntary asset lock. In fact, as was said on Second 
 Reading, we fully support and understand the principle. However, it is important to consider that, as the hon. Member for South Derbyshire has just noted, the new clause throws much of the burden of the Bill on to the consultation process. There is no longer a clear expectation with a somewhat simpler approach to the process. 
 I understand the complications. We are dealing with assets that are funded, often by past generations, and there is an inherent trust in the process that the assets exist for the co-operative and community benefit societies that they are owned by or applied to. The consultative process, through new clause 1 and others, makes it incumbent on us to consider whether putting the burden on to secondary legislation is wholly appropriate. That will have a regulatory impact in itself, which must be borne in mind, and it may increase uncertainty rather than certainty. That is particularly important when dealing with assets. 
 I noted with interest that it was expected that the regulatory requirement for the monitoring and assessments of the transactions would fall primarily to the Financial Services Authority, although the hon. Member for South Derbyshire made it clear that was not necessarily the case. The current Government's approach is that it is better to have one overarching financial services regulatory authority rather than a number of them because, one would hope, that results in greater consistency, fairness and understanding. There is also the opportunity to give the authority an educational role, particularly on some of the more esoteric entities that exist—not least co-operatives and community benefit societies. However, we all recognise that the FSA has taken time to establish itself, and it is difficult to imagine that there would be the requisite expertise across a number of bodies. The remit of the Financial Services Authority, as granted to it under the Financial Services and Markets Act 2000 is due for review near the end of the year—the precise date would be helpful if the Minister were willing to give it. Therefore, this is a good opportunity to consider the possibility of extending the FSA's remit, along with a number of other issues. 
 I am anxious to hear from the Minister because we are considering new clauses and this is her first opportunity to explain a number of the phrases in them. Much will depend upon the understanding that lies behind the secondary legislation that could be required on a number of occasions, and on its effectiveness and frequency. 
 In subsection (3) of new clause 1, the defined term is ''dedicated assets''. It is intensely important for all concerned to understand clearly what is meant here by that term. Leading up to that definition, we see regulations relating to, in subsection (1)(a), 
''assets of the society of a prescribed kind'',
 that cannot be used except, in subsection (2)(b), 
''where the circumstances are such as may be prescribed''.
 So the whole thing is being pushed into the future, for future debate. As the dedicated assets will be the subject of the potential transactions and provisions of the Bill, it would be helpful to have those delineated in a more concrete way. 
 More important, we must consider the Government's view on whether a precedent is being set with regard to the asset lock, and whether there is not a hidden agenda but a potential for these provisions to be prayed in aid in relation to other entities and assets that are not necessarily encompassed, owned or operated by co-operatives and community benefit societies. A number of the issues that are tackled in the new clause prejudge what the Government will have to consider in making their proposals resulting from the consultation—now closed—that followed the performance and innovation unit's worthy and well-received charity law reform report. Again, it would help the Committee to know where the Government believe that the proposals conform with the expected results of the consultation and with their views as to the legislation that is likely to flow from the charity law reform report. 
 Three pieces of legislation are likely to emanate from that report. One is charity law reform, another—

George Stevenson: Order. I am a little concerned that the hon. Gentleman is prejudging what might become legislation and is starting on that basis. I am sure that he will take that into account.

Stephen O'Brien: I am grateful. It is slightly awkward in that I am trying to tease from the Minister what I hope will be her prepared answers. My point in mentioning three potential pieces of legislation is that I anticipate, in addition to Bills from both the Home Office and the DTI, a Treasury Bill.

George Stevenson: Order. There might well be a Treasury Bill, but that is not what is before us today. We need to return to the clause and the new clause.

Stephen O'Brien: Given that the Treasury Minister is here—I understand that, although this is a private Member's Bill it has benefited from consultation with the Treasury—I shall mention the third piece of legislation so that you can tell me whether I am genuinely out of order, Mr. Stevenson. The third piece of legislation is an industrial and provident societies Bill. Can the Minister tell us whether this Bill anticipates that one, in which case it is important for the broad sweep of what we are dealing with, or whether the Bill is, as lawyers would say, sui generis? Does what we are dealing with have implications for something that is already in the legislative pipeline?
 I hope that the Minister's ultimate reassurance will be forthcoming on that, because new clause 1(5)(a) contains a power to introduce regulations that ''impose criminal liability''. As all hon. Members know, it is one of our important duties to scrutinise legislation properly where we are imposing criminal liability on any person or entity. I should like the Minister to look carefully at what is intended by ''criminal liability''. Is that in line with current 
 companies law liabilities that the criminal law encompasses, or is something more imposed?

Simon Thomas: As the potential new regulations under the new clause could, as the hon. Gentleman points out, impose criminal liability, it is surely important to tease out once again whether resolutions before both Houses would be made by the affirmative or negative procedure.

Stephen O'Brien: The hon. Gentleman raises an important point and anticipates where the argument was leading me. Any imposition of criminal liability under secondary legislation would obviously have to be made under the affirmative resolution procedure. I dare say that the Minister anticipated that question, and I look forward to her response.
 I could go into the clause in great detail, but I am mindful of what we all said at the outset of the Committee. However, I am concerned only that, although the legislation attempts to describe and prescribe what will give effect to the worthy intent of the Bill's promoter, the provisions are in the nature of a blank cheque to the Government, which is a little dangerous. That is so in relation to criminal liability, the point which the hon. Member for Ceredigion (Mr. Thomas) joined me in making, which also leads to concerns that the Bill is a bit premature, given the Government's current thinking, although I hope that it is not. Given that the promoter has raised the issue, I hope that the Government have had the opportunity to think such matters through carefully. I look forward to the Minister's reply. 
 The only other point that I flag up, and which the Minister may deal with today or later, is whether there is a potential for tax-driven transactions. In my experience of sitting round company board tables, whenever assets are involved there is always a great danger that some people—often advisers with vast fees—will come up with clever schemes. Those schemes often need a great deal of numerical analysis in order to establish whether they are a genuine benefit to the enterprise, or whether they are driven by tax and tax savings. From what I have read in the Bill and the new clauses, I am unclear as to whether a tax attractiveness element could enter into transactions. From my initial reading, I see nothing to suggest that a tax-saving opportunity deriving from secondary legislation should not be a reason for an exemption under the asset lock. 
 A potential tax saving or benefit should not drive the process. The assets must ultimately not only be made available to the communities that they serve but be seen in that light, rather than be friable, so to speak, across various entities in order to save tax. I rather suspect that the Treasury would endorse my view on that. However, there is no limitation or express provision, and I therefore look for some reassurance on the matter.

Ruth Kelly: I take this opportunity to welcome you to the Chair, Mr. Stevenson. I look forward to serving under your chairmanship.
 I congratulate my hon. Friend the Member for South Derbyshire on not only securing his private 
 Member's Bill but the way in which he constructively set out the purpose of the new clause and why it is to replace the original clause. I also thank him for the co-operation that he has shown since Second Reading. He ably set out not only the purpose of the clause but the very subsections and how they apply. I do not intend to repeat his arguments; rather I will confine myself to answering some of the specific points made by the hon. Member for Eddisbury (Mr. O'Brien), who speaks for the Opposition. I was slightly surprised that he suggested that the Bill may be premature, given the backing that he expressed for it on Second Reading. However, I interpret his tone as fairly constructive, and I am happy to answer some of his detailed points.

Stephen O'Brien: If clarification is needed, it is purely in relation to the strategy unit's report and my concerns about what is likely to flow from that, and whether the Bill is anticipating it, rather than standing on its own.

Ruth Kelly: We are certainly not anticipating the strategy unit's report. This is a fairly complicated area of policy. It takes time to get all the details right and it is not possible within the timetable set down by Parliament to consider all the details within the framework of a private Member's Bill, which is why the Government are happy to support new clause 1. We will certainly be happy to publish a regulatory impact assessment of the Bill. In fact, we look very carefully at the regulatory impact of all Bills and we hope to have one in the public domain before we come to debate this Bill in the future.
 The hon. Member for Eddisbury asked what we needed to consider in detail that has not already been examined by the strategy unit report. We must consider the need for robust mechanisms to ensure that takeovers, mergers and dissolutions of societies are fair and transparent. We need to decide which society should be able to take advantage of the asset lock-in regime; for example, whether asset transfers should be allowed between very different types of community benefit societies such as housing associations and social clubs. We need to ensure that societies with the lock-in can continue to evolve and change their purposes and activities appropriately. 
 To help with those issues, we must also consider whether we can prescribe for all possible circumstances in the legislation. If not, we may need to consider setting up a supervisory body or giving the powers to the Financial Services Authority. We will think very carefully about whether a supervisory body is needed, and if so, who should carry out that function. That will be subject to further detailed consultation, and there is no presumption about it at this point. 
 The hon. Gentleman suggested that we examine this in the context of the Financial Services and Markets Act 2000 review. Clearly, many matters will be looked at in the context of that review, but it is not essential that all matters are considered within that context, so I will not say today whether we would use that vehicle to examine the scope of the FSA regulations that he suggested. 
 The hon. Gentleman also suggested that implementing the reforms through secondary legislation could somehow lead to increased rather 
 than reduced uncertainty. I do not see any reason why that should be the case. Secondary legislation is just as clear and concrete as primary legislation. The principle behind the Bill has already been accepted. We are just putting the details in place. I can confirm that the Bill will be subject to affirmative resolution. Safeguards are already in place. The enabling power to introduce legislation is limited by subsection (1) of the clause, the two specific purposes of which are linked to establishing an asset lock-in regime for community benefit societies. We are committed to ensuring full and proper consultation on the provisions that we will eventually introduce.

Simon Thomas: Can the Minister confirm that she will include the National Assembly for Wales in that consultation? The Bill covers both England and Wales, but there are particular concerns and differences in some community organisations in Wales, which is the home of the co-operative movement, and it would be good to know that she will consult the National Assembly.

Ruth Kelly: I am happy to give the commitment that we will take into account the situation of Wales when carrying out the consultation.
 It is true that subsection (5) of new clause 1 allows the Treasury to impose criminal liability through secondary legislation. I have already said that such legislation would be subject to affirmative procedure, and it will be considered in conjunction with the movement and other interested parties. Penalties are already an important part of the legislative framework governing societies and the checks and balances that exist ultimately to protect the interests of societies, their members and those who deal with the sector. If we want an effective asset lock-in regime, we will have to examine criminal liability together with the other details that need to be worked through, but I confirm that the provisions are in line with existing company and society law. 
 I will be happy to write to the hon. Member for Eddisbury with the precise definition of ''dedicated assets'', and I am sure that we will debate that definition further on Report.

Gareth Thomas: Has the Minister any time scale in mind for when the consultation on the details of the secondary legislation will begin once, as we all hope, the Bill goes on the statute book?

Ruth Kelly: As I said on Second Reading, we are committed to implementing the asset lock-in regime assuming the consultation reveals any hidden problems that we had not already considered—we have set out that principle clearly. If the Bill is enacted, officials will immediately start to prepare a detailed consultation on how that regime might be established, but the timing of the consultation paper will depend on the complexity of the issues and the responses that we receive.

Stephen O'Brien: I touched on whether there would be any potential for tax, and it would help to have the Minister's reassurance on the record that she is seized of the point.

Ruth Kelly: Absolutely. As far as I am aware, asset lock-in will not affect the tax status of society's assets. I do not see any reason why tax-driven behavioural effects should arise from the Bill.
 On that note, I commend new clause 1 to the Committee, and I hope that all members will support it. 
 Question put and negatived.
Clause 1 disagreed to.Clause 2A Society's Capacity

Clause 2 - A Society's Capacity

Question proposed, That the clause stand part of the Bill.
The Chairman: With this it will be convenient to discuss the following:
New clause 2—Status of charitable societies to appear on correspondence etc—
'After section 5 of the 1965 Act insert—
''5A Status of charitable societies to appear on correspondence etc
(1) Where a registered society is a charity and its registered name does not include the word ''charity'' or the word ''charitable'', the society must state the fact that it is a charity in legible characters—
(a) in all notices, advertisements and other official publications of the society;
(b) in all business letters of the society;
(c) in all bills of exchange, promissory notes, endorsements, cheques and orders for money or goods, purporting to be signed by or on behalf of the society; and
(d) in all bills, invoices, receipts and letters of credit of the society.
(2) Where a society's registered name includes the words ''elusen'' or the word ''elusennol'', subsection (1) of this section shall not apply in relation to any document which is wholly in Welsh.
(3) The statement required by subsection (1) of this section shall be in English, except that, in the case of a document which is otherwise wholly in Welsh, the statement may be in Welsh if it consists of or includes the word ''elusen'' or the word ''elusennol''.
(4) Section 62 of this Act does not apply in respect of an offence committed by a registered society under section 61 of this Act where the offence consists of a failure to comply with this section.
(5) Any officer of a registered society, or any other person acting on such a society's behalf, who—
(a) issues or authorises the issue of any document such as is mentioned in subsection (1)(a), (b) or (d) of this section; or
(b) signs or authorises to be signed on behalf of the society any document such as is mentioned in subsection (1)(c) of this section,
in which a statement required by subsection (1) is not made in accordance with this section shall be liable on summary conviction to a fine not exceeding level 3 on the standard scale.
(6) In the case of a conviction by virtue of paragraph (b) of subsection (5) of this section, the officer or other person shall further be personally liable to the holder of any such document as is referred to in that paragraph for the amount specified in the document unless that amount is duly paid by the society.
(7) In this section, ''charity''—
(a) in relation to a society whose registered office is situated in England or Wales, has the same meaning as in the Charities Act 1993;
(b) in relation to a society whose registered office is situated in Scotland, means a body established for charitable purposes only (that expression having the same meaning as in the Income Tax Acts).'' '.
New clause 3—Capacity of society and power of committee to bind it—
'After section 7 of the 1965 Act insert—
''Capacity of society and power of committee to bind it
7A Capacity of society not limited by its rules
(1) The validity of an act done by a registered society shall not be called into question on the ground of lack of capacity by reason of anything in the society's registered rules.
(2) A member of a registered society may bring proceedings to restrain the doing of an act which but for subsection (1) of this section would be beyond the society's capacity; but no such proceedings shall lie in respect of an act to be done in fulfilment of a legal obligation arising from a previous act of the society.
(3) It remains the duty of the members of the committee of a registered society to observe any limitations on their powers flowing from the society's registered rules; and action by the members of the committee which but for subsection (1) of this section would be beyond the society's capacity may only be ratified by the society by special resolution.
(4) A resolution ratifying such action shall not affect any liability incurred by a member of the committee or any other person; relief from any such liability must be agreed to separately by special resolution.
(5) The operation of this section is restricted by section 7D of this Act (application to charitable societies); and section 7E of this Act (transactions with members of the committee and connected persons in excess of powers) has effect notwithstanding this section.
(6) In this section ''special resolution'' means a resolution passed by not less than 75% of such members of the society as (being entitled to do so) vote in person, or by proxy where the society's rules allow proxies, at a general meeting of which notice, specifying the intention to propose the resolution, has been duly given according to those rules.
(7) A copy of every special resolution for the purposes of this section signed by the chairman of the meeting at which the resolution was passed and countersigned by the secretary of the society shall be sent to the Authority and registered by it; and until that copy is so registered the special resolution shall not take effect.
7B Power of committee to bind society
(1) In favour of a person dealing with a registered society in good faith, the power of the committee to bind the society, or authorise others to do so, shall be deemed to be free of any limitation under the society's registered rules.
(2) For this purpose—
(a) a person ''deals with'' a society if he is a party to any transaction or other act to which the society is a party;
(b) a person shall not be regarded as acting in bad faith by reason only of his knowing that an act is beyond the powers of the committee under the society's registered rules; and
(c) a person shall be presumed to have acted in good faith unless the contrary is proved.
(3) The references above to limitations on the powers of the committee under the society's registered rules include limitations deriving—
(a) from a resolution of the society in general meeting or a meeting of any class of members; or
(b) from any agreement between the members of the society or of any class of members.
(4) Subsection (1) of this section does not affect any right of a member of the society to bring proceedings to restrain the doing of an act which is beyond the powers of the committee; but no such proceedings shall lie in respect of an act to be done in fulfilment of a legal obligation arising from a previous act of the society.
(5) Nor does subsection (1) affect any liability incurred by a member of the committee, or any other person, by reason of the committee's exceeding its powers.
(6) The operation of this section is restricted by section 7D of this Act (application to charitable societies); and section 7E of this Act (transactions with members of the committee and connected persons in excess of powers) has effect notwithstanding this section.
7C No duty to enquire as to capacity of society or authority of committee
 A party to a transaction with a registered society is not bound to enquire as to whether it is permitted by the society's registered rules or as to any limitation on the powers of the committee to bind the society or authorise others to do so.
7D Application of sections 7A and 7B to charitable societies
(1) Sections 7A and 7B of this Act (capacity of society not limited by its rules and power of committee to bind society) do not apply to the acts of a registered society which is a charity except in favour of a person who—
(a) gives full consideration in money or money's worth in relation to the act in question; and
(b) does not know that the act is not permitted by the society's registered rules or, as the case may be, is beyond the powers of the committee,
or who does not know at the time the act is done that the society is a charity.
(2) However, where such a society purports to transfer or grant an interest in property, the fact that the act was not permitted by the society's registered rules or, as the case may be, that the committee in connection with the act exceeded any limitation on its powers under those rules, does not affect the title of a person who subsequently acquires the property or any interest in it for full consideration without actual notice of any such circumstances affecting the validity of the society's act.
(3) In any proceedings arising out of subsection (1) of this section the burden of proving—
(a) that a person knew that an act was not permitted by the society's registered rules or was beyond the powers of the committee, or
(b) that a person knew that the society was a charity,
lies on the person making that allegation.
(4) Where a registered society is a charity with its registered office situated in England or Wales, the ratification of an act under section 7A(3) of this Act, or the ratification of a transaction to which section 7E of this Act applies, is ineffective without the prior written consent of the Charity Commissioners for England and Wales.
(5) In this section, ''charity''—
(a) in relation to a society whose registered office is situated in England or Wales, has the same meaning as in the Charities Act 1993;
(b) in relation to a society whose registered office is situated in Scotland, means a body established for charitable purposes only (that expression having the same meaning as in the Income Tax Acts).
7E Transactions with committee members and other persons in excess of powers
(1) This section applies where a registered society enters into a transaction to which the parties include—
(a) a member of the committee of the society, or
(b) a person connected with such a member or a company with whom such a member is associated,
and the committee of the society, in connection with the transaction, exceeds any limitation on its powers under the society's registered rules.
(2) The transaction is voidable at the instance of the society.
(3) Whether or not it is avoided, any such party to the transaction as is mentioned in subsection (1)(a) or (b) of this section, and any member of the committee who authorised the transaction, is liable—
(a) to account to the society for any gain which he has made directly or indirectly by the transaction; and
(b) to indemnify the society for any loss or damage resulting from the transaction.
(4) Nothing in the above provisions shall be construed as excluding the operation of any other enactment or rule of law by virtue of which the transaction may be called in question or any liability to the society may arise.
(5) The transaction ceases to be voidable if—
(a) restitution of any money or other asset which was the subject-matter of the transaction is no longer possible; or
(b) the society is indemnified for any loss or damage resulting from the transaction; or
(c) rights acquired bona fide for value and without actual notice of the committee's exceeding its powers by a person who is not party to the transaction would be affected by the avoidance; or
(d) the transaction is ratified by the society in general meeting in such a way as the case may require.
(6) A person other than a member of the committee is not liable under subsection (3) of this section if he shows that at the time the transaction was entered into he did not know that the committee was exceeding its powers.
(7) This section does not affect the operation of section 7B of this Act in relation to any party to the transaction not within subsection (1)(a) or (b) of this section.
(8) But where a transaction is voidable by virtue of this section and valid by virtue of that section in favour of such a person, the court may, on the application of that person or of the society, make such order affirming, severing or setting aside the transaction, on such terms, as appear to the court to be just.
7F Definitions relating to section 7E
(1) In section 7E of this Act ''transaction'' includes any act; and the reference in subsection (1) of that section to limitations under the society's registered rules includes limitations deriving—
(a) from a resolution of the society in general meeting or a meeting of any class of members; or
(b) from any agreement between the members of the society or of any class of members.
(2) In section 7E(1) of this Act ''company'' has the same meaning as in the Companies Act 1985.
(3) Section 346(2) to (8) of the Companies Act 1985 shall apply for the purposes of references in section 7E(1) of this Act to a person's being ''connected'' with a committee member or to a committee member's being ''associated with'' a company, but shall so apply—
(a) as if any reference to a director of a company were a reference to a member of a committee of a registered society; and
(b) subject to such other adaptations and modifications as may be specified by regulations made by the Treasury under this section.
(4) Any regulations made under this section shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.
(5) In section 7E(4) of this Act ''enactment'' includes an enactment comprised in—
(a) an Act of the Scottish Parliament;
(b) subordinate legislation, whether made under an Act or an Act of the Scottish Parliament.
(6) In section 7E(8) of this Act ''the court'', in relation to a registered society, means the court having jurisdiction to wind up the society under the provisions of the Insolvency Act 1986 as applied by section 55 of this Act.'' '.
Mr. Todd: It may be best to refresh hon. Members' memory about the purpose of the original clause 2(1), which was to protect those who trade with societies 
from an ultra vires ruling that a society has acted outside its powers. It tried to mirror similar company legislation, and the new clauses—at greater length, I must admit—aim to do the same with some additional provisions for societies that are charities.
I explained on Second Reading that in theory the only certain protection to someone dealing with a society is to obtain a copy of its rules and to satisfy themselves that the society is acting within them. That is clearly a barrier to normal business transactions. It is worth remembering that the clause relates to co-operative societies as well as community benefit societies and that many co-operative societies are very substantial economic enterprises that trade in the same markets as plcs and other corporate institutions. The proposed changes do not relieve a society of its duty to operate within its rules. They simply ensure that any responsibility for that lies squarely in the society and is not transferred to its customers, business partners or others who trade with it.
The provisions allow members to act to restrain their society from actions outside the rules. They address the particular circumstances of internal transactions where a society trades, for example, with some of its own members. In that case, the assumption has been made that such actions may not be in good faith. It should be stressed that the first element of the provisions relating to ordinary transactions with third parties assumes that a good faith transaction has taken place in which both the society and the person trading with it believed that they were trading within the rules. Where a transaction takes place within the society, that assumption is not made in law, and it should be possible to void that transaction, with the parties being liable. Similar provisions apply in company law relating to transactions with directors of companies.
A further special provision relates to societies that are charities, and is additional to the Bill that was presented on Second Reading. In that situation, the priority is the protection of the society's assets as a charity, rather than the contract that has been agreed with a third party. Dealing outside the rules would thus be voidable in such instances.
New section 5A of the 1965 Act ensures that the fact that the society is a charity is declared to anyone doing business with it. The provisions modernise the law relating to co-operatives and community benefit societies and I commend them to the Committee.
Mr. Simon Thomas: I would like to speak briefly on these provisions because they are the most Welsh part of the Bill, including as they do the two Welsh words ''elusen'' and ''elusennol. '' This is perhaps the opportunity to ensure that the Bill is right for Wales. In its new form, I believe that to be the case, and I support both the new clause and the Bill.
New clause 2 is a very welcome clearing up of the law in relation to charitable trading bodies. It will make it clearer for those who are doing business that they are dealing with a charitable body. It was not until I saw the new clauses that I realised the problem that the hon. Member for South Derbyshire was attempting to address. I welcome the fact that he has 
taken the opportunity, no doubt with advice from the right quarters, to ensure that in Wales that can be done bilingually.
It took a long time for co-operatives to be able to be registered as charities in the Welsh language in Wales. It was quite a long struggle to get the Charity Commission to recognise registration of charities in the Welsh language, which was rather strange, considering that Robert Owen started the whole business in Newtown. Nevertheless, that has been done, and the Welsh Language Act 1993 strengthened that position.
The question that I would like to ask the Minister arises from the 1993 Act, because that Act covers the Charity Commission, and will cover any new body that may arise from the review mentioned by the hon. Member for Eddisbury. We are aware that there might be a review of the laws on friendly societies in that regard. Can the Minister tell us how the Bill and system of registration will come within the ambit—within Wales, of course—of the 1993 Act?
Several charities and community bodies use the Welsh language—indeed, some of them exist to promote it. I want to assure them that they are completely in order in continuing to conduct their business in the medium of Welsh and that there will be nothing in this or any forthcoming Bill to stop them doing that. I welcome the new clauses, which clarify matters for the charities and those who trade with them, and I hope that they will be supported.
Mr. O'Brien: In response to the hon. Gentleman's remarks, I cannot help noting that the genesis of the co-operative movement came from the very English-sounding Newtown. I welcome new clauses 2 and 3. As the hon. Member for South Derbyshire rightly pointed out, they are longer than the clauses that they replace.
I am completely satisfied that it is appropriate to set out what is, in effect, the public proclamation on documents and other instruments on which people can rely. A charity should make a declaration. I am reminded of our discussions on the Trustee Bill. I do not remember whether the Minister piloted it—I do not believe that she did—but similar issues were raised. It may be constructive, albeit not key, for those who are advising and working on the Bill to glance back at some of those discussions.
Subsection (6) of new clause 2 is the most important, as it relates to the potential for personal liability where there is any contravention. That must tie in with new section 7C in new clause 3, which rightly sets out what we all, as practitioners of company law and business, know as ostensible authority. I do not believe that any of us would have any difficulty with that. However, that must be set beside the personal liability in new clause 2(6) and new section 7E in new clause 3, in which
''The transaction is voidable at the instance of the society''
in certain circumstances.
I do not wish to delve into the hypothetical intricacies, but as we are taking the two new clauses together, this is the moment to recognise that they provide anyone with the mal-intent to try to find a 
loophole with the opportunity to do so. The proposed legislation is as I would expect, as it seems to resonate with the case law that arose in relation to companies, which is equivalent to what the Bill proposes, especially for charities, and with the special resolution procedure and the Companies Acts. As I said, I do not want to go too far into the detail, but it is important to flag up that this is where the issues may lie.
I look forward to the Minister's comments.
Ruth Kelly: I agree that, in some respects, new clauses 2 and 3 are longer than the clauses that they replace. That is all in the aid of transparency, and should make it easier to interpret and use the provisions. Again, I do not intend to repeat the comments made so ably by my hon. Friend the Member for South Derbyshire (Mr. Todd)—the promoter of the Bill—who clearly said why the changes were needed and why they should facilitate the powers and capacities of societies to enter into business transactions.
The new clauses are highly desirable, and the Government support them. I accept that the provisions for personal liability are interesting and serious. If the hon. Member for Eddisbury wants to put anything in particular to me, we will of course look at it in greater detail.
On the point about the Welsh language, I point out to the hon. Member for Ceredigion (Mr. Thomas) that we took the Welsh Language Act 1993 into account in the proposals. We will consider that further as we go forward. Again, if he wants to make representations on that issue, I will of course be happy to consider them, but I assure him that we are aware of his concern. On that note, I commend the new clauses to the Committee.
Question put and negatived. Clause 3Formalities of Carrying on Societies' Business and Pre-incorporation Contracts

Clause 3 - Formalities of Carrying on Societies' Business

Question proposed, That the clause stand part of the Bill.

George Stevenson: With this it will be convenient to discuss new clause 4—Purported contracts, deeds and obligations—
'(1) After section 29 of the 1965 Act insert— 
 ''29A Purported contracts, deeds and obligations 
 (1) A contract which purports to be made by or on behalf of a registered society at a time when the society has not been registered under this Act has effect, subject to any agreement to the contrary, as one made with the person purporting to act for the society or as agent for it. 
 (2) Accordingly, the contract is to be treated— 
 (a) as imposing on that person all the obligations it purports to impose on the society; and 
 (b) as conferring on him all the rights it purports to confer on the society. 
 (3) Subsections (1) and (2) of this section apply— 
 (a) to the making of a deed under the law of England and Wales, and 
 (b) to the undertaking of an obligation under the law of Scotland, 
 as they apply to the making of a contract.'' 
 (2) In section 76 of the 1965 Act, after subsection (2) insert— 
 ''(2A) In section 29A(1) of this Act— 
 (a) the reference to a registered society includes a reference to a society registered under the law for the time being in force in Northern Ireland for purposes corresponding to those of this Act; and 
 (b) the reference to this Act includes a reference to that law.'' '.
 New clause 5—Execution of deeds and other documents— 
'(1) After section 29A of the 1965 Act (which is inserted by section [Purported contracts, deeds and obligations]) insert— 
 ''29B Common seal 
 (1) Notwithstanding any enactment or rule of law, a registered society need not have a common seal. 
 (2) If a registered society has a common seal, the society shall have its registered name engraved on the seal in legible characters. 
 (3) If, after the coming into force of subsection (1) of this section, a registered society decides to have a common seal, it shall not cause such a seal to be made unless the registered rules of the society contain provision for the custody and use of that seal. 
 (4) Section 62 of this Act does not apply in respect of an offence committed by a registered society under section 61 of this Act where the offence consists of a failure to comply with subsection (2) or (3) of this section. 
 (5) Any officer of a registered society, or any other person acting on such a society's behalf, who uses or authorises the use of any seal purporting to be the common seal of the society which does not have the society's registered name engraved on it in legible characters shall be liable on summary conviction to a fine not exceeding level 3 on the standard scale. 
 (6) In this section ''enactment'' includes an enactment comprised in— 
 (a) an Act of the Scottish Parliament; 
 (b) subordinate legislation, whether made under an Act or an Act of the Scottish Parliament. 
 29C Methods for execution of documents: England and Wales 
 (1) The following provisions have effect with respect to the execution of documents by a registered society under the law of England and Wales. 
 (2) A registered society may, if it has a common seal, execute a document by affixing that seal to it. 
 (3) A document— 
 (a) signed by a member of the committee of a registered society and the secretary of the society, or by two members of that committee, and 
 (b) expressed (in whatever form of words) to be executed by the society, 
 has the same effect as if it were executed under the common seal of the society. 
 (4) A document executed by a registered society which makes it clear on its face that it is intended by the person or persons making it to be a deed has effect, upon delivery, as a deed; and it shall be presumed, unless a contrary intention is proved, to be delivered upon its being so executed. 
 (5) In favour of a purchaser a document shall be deemed to have been duly executed by a registered society if it purports to be signed by a member of the committee of the society and the secretary of the society, or by two members of the committee, and, where it makes it clear on its face that it is intended by the person or persons making it to be a deed, to have been delivered upon its being executed. 
 (6) Subsections (3) to (5) of this section apply whether or not the society has a common seal; and, in subsection (5) of this section, 
''purchaser'' means a purchaser in good faith for valuable consideration and includes a lessee, mortgagee or other person who for valuable consideration acquires an interest in property. 
 29D Execution of documents: Scotland 
 (1) Under the law of Scotland, for the purposes of any enactment— 
 (a) providing for a document to be executed by a registered society by affixing its common seal, or 
 (b) referring (in whatever terms) to a document so executed, 
 a document signed or subscribed by or on behalf of the society in accordance with the provisions of the Requirements of Writing (Scotland) Act 1995 shall have effect as if so executed. 
 (2) In this section ''enactment'' includes an enactment comprised in— 
 (a) an Act of the Scottish Parliament; 
 (b) subordinate legislation, whether made under an Act or an Act of the Scottish Parliament. 
 29E Power of society to have official seal for use abroad 
 (1) This section applies to a registered society if— 
 (a) it has a common seal; and 
 (b) its objects require or comprise the transaction of business in foreign countries. 
 (2) The society may, if authorised by its registered rules, have an official seal for use in any territory, district, or place elsewhere than in the United Kingdom. 
 (3) An ''official seal'' is a facsimile of the society's common seal with the addition on its face of the name of every territory, district or place where it is to be used. 
 29F Effect of use of official seal 
 The official seal of a registered society when duly affixed to a document has the same effect as the society's common seal. 
 29G Authorisation of use of official seal 
 (1) If a registered society has an official seal, it may authorise any person appointed for the purpose as respects any territory, district or place appearing on the face of that seal to affix it to any deed or other document to which the society is party there. 
 (2) An authorisation for the purposes of subsection (1) of this section must be given— 
 (a) in the case of a society with its registered office in Scotland, by writing subscribed in accordance with the Requirements of Writing (Scotland) Act 1995; and 
 (b) in any other case, by writing under the society's common seal. 
 (3) As between the society and a person dealing with such an agent, the agent's authority continues— 
 (a) if a period is mentioned in the authorisation, during that period; or 
 (b) if no period is there mentioned, until notice of the revocation or determination of the agent's authority has been given to the person dealing with him. 
 (4) The person affixing the official seal shall certify in writing on the deed or other instrument to which the seal is affixed the date on which and the place at which it is affixed.'' 
 (2) In section 3 of the 1965 Act (registration to effect incorporation of society), omit ''a common seal and with''. 
 (3) In subsection (6) of section 5 of the 1965 Act (registered name of society) omit ''engraven in legible characters on its seal and''. 
 (4) In subsection (7) of that section— 
 (a) omit paragraph (a); and 
 (b) in paragraph (b) for ''that name'' substitute ''the society's registered name''. 
 (5) Omit section 36 of the 1965 Act (provision about the execution of documents by societies in Scotland which has been superseded and repealed there but which remains in force elsewhere). 
 (6) In section 76(2) of the 1965 Act (provisions which apply to Northern Ireland societies that have recorded their rules with the 
Financial Services Authority), for ''26 to'' substitute ''26 to 29, 29B to 29D,''. 
 (7) For paragraph 13 of Schedule 1 to the 1965 Act substitute— 
 ''13. If the society is to have a common seal, provision for its custody and use.'' 
 (8) In section 91 of the Land Registration Act 2002 (c.9) (formalities in relation to electronic dispositions) after subsection (9) insert— 
 ''(9A) If subsection (3) of section 29C of the Industrial and Provident Societies Act 1965 (execution of documents) applies to a document because of subsection (4) above, subsection (5) of that section (presumption of due execution) shall have effect in relation to the document with the substitution of ''authenticated'' for ''signed''.'' 
 (9) The Schedule to this Act (which contains repeals made as a result of this section) shall have effect.'.
 New schedule 1—'Repeals— 
Short title and chapter 
 Extent of repeal 
 Industrial and Provident Societies Act 1965 (c. 12) 
 In section 3, the words ''a common seal and with''. In section 5, in subsection (6) the words ''engraven in legible characters on its seal and'', and subsection (7)(a). Section 36.'.

Mark Todd: May I briefly remind the Committee what clause 3 is designed to achieve. It addresses the technical issues relating to the process of agreeing contracts and undertaking business transactions. That is not surprising, because that aspect of industrial and provident society law has not been revised in recent times and some provisions are archaic. The new provision sets out the changes in law with greater clarity and, admittedly, at somewhat greater length than the original draft. Incidentally, if the House passes the Bill into law, I will certainly have a more substantial bundle to my name than I thought that I would have at the start.
 Let me give examples of the way in which the new clauses and the schedule will work. The current legislation requires a society to have a common seal and to use it in certain transactions. It also requires a society to keep the seal in a secure place, which often means that documents requiring the use of a seal must be transported to the location where the seal is kept. 
 New clause 5 will allow societies to operate without a seal. That freedom is the same as that for a company. Overseas transactions, which are particularly difficult when a seal is required, will be facilitated, and the enabling of contracts before a society is registered, which is obviously a critical part of the establishment of a society, will also be made easier. The new clause will reduce the costs on the co-operative and community benefit society movement, and the administrative complexity of co-operatives. I commend the provisions to the Committee.

Stephen O'Brien: It is wholly appropriate to rely on what I said on Second Reading on the provisions that the new clauses replace, because both sets of provisions are uncontroversial, timely and important in the modern world of transactions. It is wholly fair for the societies that we are considering as a result of the Bill to have the opportunity to operate in a modern
 way. I therefore have no difficulty whatever with the provisions.
 The Minister has sought to reassure us on the only overriding issue. Indeed, I received reassurance during Second Reading on 31 January that, to the extent that anything in the provisions might hint—hypothetically, I dare say—at any past ultra vires by comparison with what is proposed under the Bill, it is not intended in any sense to throw into doubt past transactions and is intended to operate wholly for future transactions. That is in the Bill, so I do not have difficulty with it. However, it was a concern that we rightly raised on Second Reading. It is important that those who later read our proceedings understand that there is no suggestion that anything in the past has the potential to be ultra vires. We do not want those who have had transactions with these societies are not faced with greater uncertainty or change in their circumstances. 
 The hon. Member for South Derbyshire said that the new clauses were incontrovertibly longer than those that they replace. I make no bones about that, as it is important that the thought process that resulted in these proposals should cover as many angles as possible. I have spent much time with the Paymaster General on the tax law rewrite measure, which is going through the House at present. The language in this Bill does not seem to fit with the language in that proposal, although it is unlikely to change much at this stage. That may be slightly unfair as it is a difficult area in which to apply an English crystal mark, as it were. It is always helpful if the language in a Bill is as easy to read as the tax law rewrite measure, which all parties support, and on which there is further work to be done. 
 I am happy to register our support for the new clauses.

Simon Thomas: New clause 4(2) would insert a new subsection in section 76 of the Industrial and Provident Societies Act 1965, which would state:
''the reference to a registered society includes a reference to a society registered under the law for the time being in force in Northern Ireland''.
 However, clause 6, which refers to short title, commencement and extent, states that the Bill does not extend to Northern Ireland. Why insert a new clause into the 1965 Act by means of a Bill that does not extend to Northern Ireland? There may be a good reason for it, but it does not seem to marry with my reading of the proposals.

Ruth Kelly: The new clauses inserted into the 1965 Act would facilitate the ability of societies to enter into contracts and to undertake business transactions by modernising the measure in line with the position in company law in relation to how societies execute deeds and documents and enter into contracts.
 I will clarify the point about Northern Ireland. The provision that the hon. Gentleman mentioned refers to Northern Irish societies which are operating within Great Britain—hence the need for the reference. 
 I welcome the endorsement of the new clauses made by the hon. Member for Eddisbury. I confirm that they apply only to future transactions and we will ensure 
 that that is clarified in the commencement order. I commend the new clauses to the Committee. 
 Question put and negatived.Clause 4Interpretation

Clause 4 - Interpretation

Question proposed, That the clause stand part of the Bill.
Mr. O'Brien: I want to make a point of reservation.
The Chairman: That's a new one.
Mr. O'Brien: I will be making a point on clause 5 which could have an impact on this clause and on new schedule 1. However, it can be debated only in the next clause.
The Chairman: I am grateful to the hon. Gentleman. I shall judge that at the time.
Question put and agreed to. 
 Clause 4 ordered to stand part of the Bill.

Clause 5 - Short title, commencement and extent

Mark Todd: I beg to move amendment No. 4, in
clause 5, page 4, line 1, leave out subsection (2).

George Stevenson: With this it will be convenient to discuss
 New clause 7—Commencement— 
No. NC7, to move the following Clause:— 
 '(1) The preceding provisions of this Act shall come into force on such day as the Treasury may by order appoint, and different days may be so appointed for different purposes. 
 (2) An order under this section shall be made by statutory instrument and may contain such transitional provisions as appear to the Treasury to be necessary or expedient.'.

Mark Todd: The amendments and new clauses are self-explanatory for those who have read them. [Interruption.] The hon. Member for Edmonton (Mr. Love) has perhaps not been devoting his time to that task. The proposals simply define the geographical scope of the Bill. I will simply say in passing how much I welcome the participation of the hon. Member for Ceredigion (Mr. Thomas). He rightly reflected on the importance of Wales' historical links to the co-operative movement. I greatly appreciate his support for the Bill. I am grateful for his attendance and participation in the debate. One of the amendments makes it clear that the Bill applies to England and Wales and sets out the circumstances in which it may apply to the Channel islands. It also sets out the process by which the Bill might come into force and be implemented.

Stephen O'Brien: I have only one point to make. It has relevance to new schedule 1, which has just been agreed to, to clause 5 and new clause 4. I have had a letter from my constituent, Mr. Martin Beaumont, who is the chief executive of the Co-operative Group. Until recently he was the chief executive of United Co-op in the north-west. Like the Minister, I am proud to represent a north-west seat. As I said on Second
 Reading, I shop every week at my local Co-op in the village of Bunbury in the heart of my constituency.
 I note that the hon. Member for Harrow, West (Mr. Thomas) is also in his place. On Second Reading he was rightly congratulated on his work on a previous Bill. I also recognise that my fellow member of the Institute of Chartered Secretaries and Administrators, the hon. Member for Edmonton will have scrutinised the Bill in great detail. Having discussed the matter with Mr. Peter Hunt of the Co-operative party, who may well be known to Labour Members, Mr. Beaumont made a suggestion, which I hope the Minister will consider. The matter could have been proposed as an amendment. It is probably best to discuss it and leave the promoter of the Bill and the Minister to decide whether they want to adopt it. 
 Clause 5 says that the legislation may be cited as the Co-operatives and Community Benefit Societies Act 2003 and relates back to the Industrial and Provident Societies Acts. The Industrial and Provident Societies Act 2002 was promoted by the hon. Member for Harrow, West with Government support. Mr. Beaumont suggests replacing the phrase in clause 5 
''the Industrial and Provident Societies Act 1965 to 2003''
 with 
''the Co-operatives and Community Benefit Societies Acts 1965 to 2003''.
 While that may seem a purely cosmetic improvement, it has some resonance given the helpful rationale that he sets out. With your indulgence, Mr. Stevenson, I should like to read it out.

George Stevenson: Order. I am more than happy to accept that, but I am looking at the amendment and the new clause. The amendment deals with the period of expiration and the new clause deals with the Act coming into force and transitional provisions. Provided that the hon. Gentleman quotes the letter in that context, we shall be okay.

Stephen O'Brien: In that case, I should prefer to ask for your guidance. Given that my point relates to clause stand part, is this an appropriate point to raise it?

George Stevenson: The question on the amendment will be put when the debate has concluded. The schedules and new clauses will be dealt with formally, so if there is to be any debate on the new clauses, it should take place when the new clause is called. I am simply saying what the amendment or new clause covers. If the letter from which the hon. Gentleman wishes to quote is relevant, he may refer to it.

Stephen O'Brien: I hope that that will be found to be the case. It is timely given that we are dealing with the short title and commencement of the Bill.

George Stevenson: I hope that that is helpful.

Stephen O'Brien: It is helpful.
 The rationale given was simply that the amendment would change the title in the way that I described. It rightly refers to the report published last September by the Government strategy unit on the charitable and not-for-profit sectors and to the consultation period. 
 That is relevant to all industrial and provident societies because the report reviewed the legislative framework of their businesses and made several key recommendations, which may transpire in future Government legislation. One of them was that we should now refer to ''co-operatives and community benefit societies'' and that the umbrella term ''industrial and provident society'' should no longer be used. 
 It is felt that the term ''industrial and provident society'' is old-fashioned and meaningless in a modern business context. Indeed, no societies call themselves by that term, choosing to use the more public-friendly terminology, ''co-operatives and community benefit societies'' instead. It is a modest request, which simply seeks to bring the name of the legislation, the subject of clause 5—

George Stevenson: Order. I am reluctant to interrupt, but we are anxious to make progress and I must ask for the hon. Gentleman's help. We are debating amendment No. 4. The issues raised by clause 5 will be debated during a stand part debate on that clause. I hope that that is helpful.

Stephen O'Brien: I hope it is helpful.

George Stevenson: Perhaps I should repeat what I said. I do not want to go out of the Committee any more confused than I was when I came in. We are debating amendment No. 4 and new clause 7. Amendment No. 4 is the subject of debate and new clause 7 will be put formally later. We shall have a clause stand part debate on clause 5 at a later stage, so the hon. Gentleman will have an opportunity to discuss it, but not in relation to amendment No. 4. I hope that that clarifies the matter.

Stephen O'Brien: I am grateful. I shall leave what I said on the record and take the matter up later.

Ruth Kelly: It is difficult to know how to respond to that.
 Amendment No. 4 removes the subsection that provides for the Bill to come into force two months after the date on which it is enacted. New clause 7 provides for the Act's commencement by statutory instrument and provides that the relevant orders should contain any appropriate transitional provisions. The Bill will change the way in which principal parties may conduct their business, so it is important that adjustments can be made smoothly. For example, a commencement order will ensure that a suitable date for commencement may be chosen and made known, and if appropriate, that different dates may be selected for different provisions. In order to ensure a smooth changeover to the modernising provisions, it may also be important to make transitional provisions. For example, the commencement order may need to specify the legal implications for contracts that are already in existence or in progress when the Act comes into force. It is the Government's intention to allow societies to benefit from the new provisions as soon as possible. We support the amendment and the new clause, which will help to ensure that the change in the legislative framework for societies will take place with the 
 minimum of uncertainty for the societies and those who deal with them. 
 Amendment agreed to.

Mark Todd: I beg to move amendment No.5, in
clause 5, page 4, line 2, at end insert— 
 '(2A) Section (Execution of deeds and other documents)(8) extends to England and Wales only.'.

George Stevenson: With this it will be convenient to discuss the following:
 Amendment No. 7, in 
clause 5, page 4, line 3, leave out 'does not extend' and insert 'extends'.
 New clause 6—Channel Islands— 
'(1) Her Majesty may by Order in Council direct that any provision of this Act or any instrument made under or by virtue of it shall extend, with such modifications (if any) as may be specified in the Order, to any of the Channel Islands. 
 (2) An Order in Council under this section may contain such transitional, incidental or supplementary provision as appears to Her Majesty to be necessary or expedient.'.

Mark Todd: I suspect that I may have been the origin of some of the confusion of the hon. Member for Eddisbury by referring to this group of amendments and new clauses in a block rather than two separate groups. Amendment No. 5 and new clause 6 refer to the geographical scope of the Bill. However, I note that amendment No. 7 would extend the geographical scope of the Bill to Northern Ireland.
 The amendment and the new clause are designed to set out clearly the geographical scope of the Bill, and I commend them to the Committee.

Gareth Thomas: I congratulate my hon. Friend on the way in which he has presented the Bill thus far. Amendment No. 7 is not intended as a wrecking amendment. I tabled it in the spirit of probing and seeking to advance the reform of industrial and provident society law for Northern Irish co-operatives and community benefit societies.
 At the outset, I should say that I have had the opportunity to meet my hon. Friend the Member for Dudley, South (Mr. Pearson), who is the Northern Ireland Minister with responsibility for this area. As hon. Members who study such things know, he announced a review of industrial and provident society legislation as it affects Northern Ireland in November. 
 Nevertheless, my concern is that, given the Act last year and what we hope will become an Act this year, Northern Irish co-ops and community benefit societies will substantially lag behind in the process of legislative reform in comparison with other societies, given the increasing recognition of the importance of social enterprises and community organisations that want to use the asset lock and other modernisation provisions in the Bill. Those same issues affect Northern Irish societies, and surely we should be seeking to amend the legislation as it affects them as a matter of some urgency. Why should they be discriminated against in comparison with their fellow competitive societies in England, Wales and Scotland? 
 It is worth flagging up the potential that social enterprises and community organisations in Northern 
 Ireland have for bringing communities together. They are a mechanism for bridge building. In the Northern Irish context, that is an important additional element to the benefits that social enterprises and community organisations such as co-operatives can bring. 
 I recognise that there is a willingness in the Northern Ireland Office to consider how reform can be progressed. I hope that my hon. Friend the Minister will be able to set out what discussions her Department has had with the Northern Ireland Office. I hope that she will commit to putting the power of the Treasury behind the Northern Ireland Office's reform agenda and perhaps move the reform process into the fast lane as opposed to the medium-fast lane, where it currently appears to be. 
 As I said, amendment No. 7 is probing in spirit. Nevertheless, I hope that my hon. Friend will be able to reassure me that her Department hopes also to reform Northern Irish legislation.

Ruth Kelly: As my hon. Friend the Member for South Derbyshire said, amendment No. 5 extends the territorial extent of subsection (8) to England and Wales. It is a technical provision and I do not intend to dwell on it. The Government fully support new clause 6 and amendment No. 5.
 Amendment No. 7 would extend the provisions of the Bill to Northern Ireland. I believe that there may be a divergence between what my hon. Friend the Member for Harrow, West wishes to achieve and the practical effect of the amendment. Separate legislation governs Northern Ireland's industrial and provident societies, and societies based there are registered under that legislation, not under the 1965 Act. That Act, which the Bill amends, does not extend to Northern Ireland. I am sure that my hon. Friend recognised those points when tabling his probing amendment. 
 To achieve the same general effect for societies based in Northern Ireland, it would be necessary to amend the legislation that applies there. However, the wider issue is how legislation governing societies is developing in Great Britain and Northern Ireland. The treatment of Northern Ireland societies when trading under the law of England and Wales or Scotland is already recognised in the 1965 Act. The Bill as amended will also take account of the trading of Northern Ireland societies in Great Britain when appropriate. 
 Northern Ireland and Treasury officials are liaising on how industrial and provident society legislation should be modernised. We are currently going through similar processes. The strategy unit has examined the legislation in relation to societies in the not-for-profit sector in Great Britain, and the Northern Ireland authorities have begun a review of policy on Northern Ireland societies, including their legislative framework. It is possible that the two reviews may have different outcomes. That is not inconsistent or even inappropriate: it could be a rational outcome if the needs and priorities of Northern Ireland societies are different from those in Great Britain. That would result in different legislative provisions. 
 The important point is that both we and Northern Ireland have undertaken, or are currently undertaking, a detailed review of industrial and provident society legislation. We are considering carefully what is in the best interests of the movement. The reforms that emanate from the process may not be the same, but we should arrive at flexible legislation that meets the needs of the societies to which it applies. 
 I fully understand and sympathise with the concerns expressed by my hon. Friend the Member for Harrow, West. Unfortunately, it is not feasible to address them in the Bill. However, I give the a commitment that Treasury officials will continue to liaise with the Northern Ireland authorities on those issues.

Gareth Thomas: I am grateful to my hon. Friend the Minister for those words of reassurance. I recognise that there may be potential differences between what emerges from the review initiated by my hon. Friend the Member for Dudley, South, and the discussions initiated by the Treasury through the strategy unit. That is obviously a consequence of devolution, and I do not have a problem with that per se.
 I welcome the Minister's assurance that the Treasury will continue to liaise with officials in Northern Ireland. Instead of merely encouraging liaison, I would gently urge her to put the power of the Treasury behind that liaison. I suspect that that would accelerate the reaching of conclusions in Northern Ireland. 
 Amendment agreed to. 
 Question proposed, That the clause, as amended, stand part of the Bill.

Stephen O'Brien: I am grateful not only for your early clarification, Mr. Stevenson, but for the fact that the hon. Member for South Derbyshire nobly and honourably offered to share in my confusion. He can be exonerated. However, the reason for the confusion was that the point extends across the Bill. Most importantly, it concerns the original clause 5, which is about short title, commencement and extent. I hope that what I have already said can be taken in future to refer also to this part of the Bill. The key point is that the term ''industrial and provident society'' is felt to be old-fashioned.
 I say that with a great deal of respect for the hon. Member for Harrow, West, who put a great deal of effort into promoting—successfully—the Industrial and Provident Societies Act 2002. Nevertheless, there is a suggestion that that title is meaningless in the modern business context. Societies do not use it, preferring to be called co-operatives and community benefit societies. This is purely a probing suggestion; I leave it for the Government and the promoter of the Bill to consider, knowing that there will be an opportunity to adjust the title on Report.

Gareth Thomas: I strongly support the hon. Gentleman's suggestion. He has approached the matter in the right way by presenting it as a subject for discussion rather than as an amendment. I have no problem with the idea that we should change the title
 of the legislation. The term ''industrial and provident society'' was probably outdated when the 1965 Act came in—it certainly was last year—and I support change at the appropriate time.

Mark Todd: I echo my hon. Friend's sentiments. Industrial and provident societies legislation has a resonance that, as an historian, I admire. However, it has little relevance to today's transactions of either co-operatives or community benefit societies. The hon. Member for Eddisbury has made a valuable point that deserves further discussion on Report.

Ruth Kelly: The point is valuable and we shall consider it in due course. It was raised previously in the strategy unit report.
 Question put and agreed to. 
 Clause 5, as amended, ordered to stand part of the Bill. 
 New Clauses 1 to 7 brought up, read the First and Second time, and added to the Bill.

New clause 9 - Application of company accounts

'—.Part VII of the Companies Act 1985 as for the time being in force shall apply to any society registered under the Industrial and Provident Societies Act 1965 as if that society were a company.'.—[Mr. Love.]
 Brought up, and read the First time.

Andrew Love: I beg to move, That the clause be read a Second time.
 From the Back Benches, I, too, welcome you to the chair, Mr. Stevenson. This, too, is a probing new clause. It concerns the application of company accounts and audit provisions to industrial and provident societies. It is similar to one that was proposed during the passage of the Industrial and Provident Societies Act 2002, which received sympathetic consideration from the Treasury. Its terms reflect a consultation that was carried out in 1998, when the Treasury circulated all industrial and provident societies about the issues that were of concern to them. 
 Among the issues raised in that consultation were the outdated legislation on which industrial and provident societies had to base their activities, and the desire for a more level playing field between industrial and provident societies and companies. That was not only because it is right that there should be a level playing field, but because it was believed that industrial and provident societies were disadvantaged in their competition with companies by the fact that legislation imposed considerable additional burdens on them that were not faced by companies. 
 There are a number of ways in which such issues could be addressed, including the use of the Regulatory Reform Committee. However, amendments to legislation would be required to address the major issues that were raised in the 1998 consultation. I therefore believe that private Member's Bills and the Treasury's own Bills are the right vehicle for such issues to be debated and decided on in Parliament. 
 Parliament has not examined the question of industrial and provident societies extensively. As has already been mentioned, most of the relevant Acts of Parliament were consolidated in 1965. The Industrial and Provident Societies Act 2002 was the first legislation on the subject to be enacted since 1965: this Bill, when enacted, will be the second. There is a great deal more that needs to be done. 
 The 1998 consultation exercise set out the main areas in which industrial and provident societies wanted to see changes. In this probing new clause, I have chosen one of the areas in which there is an obvious lack of a level playing field: the way in which companies and industrial and provident societies have to provide accounts, and the auditing requirements to which they are subject. 
 Company law is changed on a regular basis—in recent years there has been a very comprehensive review of company law that updated it and brought it into the 21st century. However, there have been no more than piecemeal changes to the law on industrial and provident societies. 
 The current auditing requirements for companies mean that they can produce unaudited accounts and provide them to the members at half-yearly or annual meetings. However, if an industrial and provident society wishes to keep its members informed in the same way, it must provide properly audited accounts, which is an expensive and time-consuming process to undertake, so they are at a severe disadvantage in keeping their members informed and up to date, despite the fact that they are required to do so. 
 I shall not go into the matter in great detail, as I am aware that we are short of time and that hon. Members want to conclude the Committee stage. However, the Treasury needs to examine the issue, because of the additional burdens and costs imposed on industrial and provident societies. The Minister was sympathetic last year, and I hope that the Treasury has had an opportunity to look at the areas in which industrial and provident societies are disadvantaged. Can she give us some hope or expectation that the Treasury is taking seriously the issues that arose from the 1998 consultation? If it is not possible to insert an appropriate new clause at this stage, will she assure us that the Treasury is seriously considering introducing legislation to address those issues?

Stephen O'Brien: I am grateful to the hon. Member for Edmonton, who raised this important issue by tabling the new clause, which he helpfully described as probing. Given what we discussed on Second Reading and today, it would be a shame if this process, which has flagged up several serious issues, were to delay the progress of the legislation, which has cross-party support.
 I thank you, Mr. Stevenson, for your chairmanship of the Committee, which has guided me through what has not always been a completely straightforward debate. We got there in the end. I also thank the Committee for such constructive consideration of the Bill, which is wholly worthy and deserves to be enacted.

Gareth Thomas: I support my hon. Friend the Member for Edmonton. He is absolutely right to flag up the lack of a level playing field for co-ops and companies, and to highlight the significant additional costs that co-ops occasionally incur as a result of the differences. I understand that it can cost the largest of the co-ops—the Co-op group—£250,000 extra to meet the same provisions as companies. The matter needs urgent consideration, and suitable changes should be made through legislation or deregulatory provisions. I recognise that this is a probing new clause, but I hope that my hon. Friend the Minister will offer some assurance to those of us who are concerned about the difference between company and co-op provisions.

Ruth Kelly: I congratulate my hon. Friend the Member for Edmonton on the persuasive way in which he set out his concerns. He knows, as do other members of the Committee, that the Government are sympathetic to those concerns. We agree with the general principle that, as far as is appropriate, there should be a level playing field between companies and industrial and provident societies. It is, of course, important that societies can operate in a modern and appropriate regulatory context. Last year's strategy unit report, ''Private Action, Public Benefit'', examined the legal and regulatory framework for social enterprise. It made specific recommendations and proposals for industrial and provident society legislation. We have examined the responses received from the public consultation exercise on the report, but I am afraid that I cannot say today whether we will act further. However, I assure my hon. Friend that we will shortly set out how we hope to organise the work arising from the legislation and our priorities for reform.
 I am sure that my hon. Friend is well aware that the proposals cannot instantly be translated into legislation. We take the issues seriously, and I hope shortly to be able to reassure him that we are 
 considering the priorities and will outline what those priorities will be.

Mark Todd: I commend the principle of the new clause. Reference was made in the original draft of the Bill to changes in this area. I am reassured by my hon. Friend the Minister's statement, although she may be chilled by the thought of the means by which those changes may be delivered—yet a further private Member's Bill on co-operative and community benefit societies.
 May I say how grateful I am for your chairmanship of the Committee, Mr. Stevenson, and to hon. Members who gave their hard-pressed time in the House to consider the matter?

Andrew Love: I thank my hon. Friend the Minister for her positive and sympathetic assurances about Treasury attitudes to new clauses of this sort. I also thank her for informing us about the outcome of the consultation exercise, which probably reflects the views of industrial and provident societies and of other organisations that took part in the Treasury consultation.
 There is great anticipation among Members of Parliament and people in social enterprises, co-operatives and community benefit societies about the result of the consultation process being fulfilled in legislation and I hope that the Minister will be able to introduce the appropriate measures. On that basis, I beg to ask leave to withdraw the motion. 
 Motion and clause, by leave, withdrawn. 
 New schedule 1 brought up, read the First and Second time, and added to the Bill. 
 Bill, as amended, to be reported. 
 Committee rose at one minute past Four o'clock.